Arkansas Attorney General Dustin McDaniel filed a consumer-protection lawsuit against Standard and Poor’s on Tuesday, joining the U.S. government and other states in accusing the debt-rating agency of fraud for giving high ratings to risky mortgage bonds.
S&P intentionally misled investors in the way it rated securities that were backed by faulty subprime mortgages, influenced by its desire to earn fees from its investment-bank clients, according to the complaint filed in Pulaski County Circuit Court.
The federal government and several other states also filed suits against S&P, alleging that the ratings agency adjusted its analytical models for rating residential mortgage-backed securities and collateralized debt obligations so it could assign as many of the top AAA ratings as possible, instead of assessing actual credit risk, in order to earn additional revenue from bank clients.
"Arkansas consumers expect credit-rating agencies to provide unbiased and independent analysis of securities," McDaniel said. "We believe S&P was more concerned with making additional profits than by assessing risk, and that the agency's actions are directly linked to the financial crisis."
In a statement Tuesday, S&P said its ratings reflected its best judgments and noted that other rating agencies independently gave the same high ratings. It said the government also failed to predict the subprime mortgage crisis.